Are Options Accurate?

Wednesday, 25 Jun 2008 | 3:55 PM ET

How reliable are options as a way of predicting stock movement? Here’s what the options markets said about Oracle and Research In Motion ahead of earnings. Were they right?

Research In Motion

Ahead of earnings the options volume in Research in Motion appears to be bullish, explains Jon Najarian. It seems like many more investors are betting on the upside. I expect good news after the bell.


Conversely options action ahead of Oracle earnings are negative. There’s a combination of calls sold and puts purchased. I expect this stock to pull back.

How accurate is your methodology?

Big Thunder, the system that I use for tracking, is typically accurate 80% of the time.

Let’s see!


updated after hours

- Research in Motion reported profit and sales that were both below analysts' estimates, and the company's shares dropped about 8 percent in extended trading.

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- Oracle reported a profit that rose 27 percent over last year and topped analysts' estimates, while sales beat expectations as well. At first shares rose in extended hours trading but ultimately turned lower.

Looks like this might be that 20% of the time that options aren't accurate.

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